Paytmlaunched its online shopping app,Paytm Mall, at the end of February. This move was intended to improve the online retail experience on its platform.Alibaba is a major investorin this project and assists the etailer totake on the ecommerce trinity– Flipkart, Amazon and Snapdeal.
To make sure Paytm Mall is a hit with customers, the onlinemarketplace has introduced same-day delivery and large appliance installation services across 20 cities. These facilities are also expected to make the most of high margins and prices offered by the segment. To fulfil timely orders, Paytm Mall has teamed up with brands, distributors and multi-brand stores.
Paytm Mall’s secret to efficiency is local sellers
According toAmit Bagaria, the Paytm Mall Vice President, brand-led tie-ups with local merchants has allowed –
Smooth installation at nominal rates
Growth for local vendors
Around 80% of the platform’s orders are fulfilled by local sellers. This makes it easier to deliver and install large appliances in no time and at a decent rate too. Those selling on the platform are also provided withinsights and analyticsto help them better the supply chain even further.
Bagaria alsosaid,“The upcoming summer has meant an increase in sales of air conditioners that has been further boosted by easy deliveries and installation services offered on our platform.”
This segment has a sales team of 500 which will make it easy to scale these services in 50 cities through partnerships with local merchants.
Paytm Mall does not maintain stock of inventory; it is a pure play marketplace. It processes intra-city orders from nearest brands, retailers or business partners.
When it comes to fulfilment, Bagariasaid,“For fulfilment, we have a massive network of 40-plus service partners to handle logistics. Our partners like Blue Dart, Delhivery and Xpress Bees have specialised services for local deliveries with correct handling and shorter delivery times.”
Amazon and Flipkart have also invested in large appliance installation, developing specialised warehouses and distribution centres. This means Paytm is on the right track and should be able to catch up with the leaders of ecommerce soon enough.
Time is running out for home-grown etailer Snapdeal as it waits for the investors to finalize the sale deal. First it seemed that the marketplace is in an enviable position since two big playersFlipkartandPaytmare in the running to buy it.
But it turns out, if the contract isn’t sealed soon enough,Snapdealwould find it very difficult to survive. According toreports, the company is running out of cash and is scraping the bottom of the funds barrel.
“A deal has to be closed soon, one way or the other. The company doesn’t have much cash left. It can run operations for another 3-4 months but after that it’s tough to see how it’ll survive.”
Cost-cutting can buy only 3 months
Snapdeal went on a cost-saving mode late last year. The companysplurgedon a rebranding project ahead of the festive shopping season in September 2016. But after the festive sales wrapped up, Snapdeal startedfocusingon reserving cash.
In 2017 alone, the Kunal Bahl-led company haslaid off600 employees,trimmed downits office space andpaused affiliatecampaigns. The etailer hiked seller fees,added new fashion brands, slashed down valuation tobecome profitable.
The online marketplace’s representativeshared,
“Snapdeal has been able to improve its monthly Ebitda (earnings before interest, tax, depreciation and amortization) by nearly 80% over the last 18 months as per the guidance of the Board to drive towards profitability.”
Yet, all this would leave enough cash to last only for 3-4 months. Therefore, Snapdeal is in dire need of funds, which would flow in only after the acquisition papers are signed.
Nexus Venture is the roadblock?
It is common knowledge that Snapdeal’s largest investorSoftbankis orchestrating the merger deal with Flipkart. And that early-stage investors Kalaari Capital and Nexus Ventureweren’t happywith the earlier deal.
But after reworking on the terms and conditions, Kalaarigave its nod. Now approval of Nexus is pending, which might be the reason why the merger arrangement is yet to be finalized. Would the investor agree before Snapdeal runs out of money?
Fashion etailer Jabong too was in a similar position last year, until Flipkart-owned Myntra bought it. Interestingly,Snapdeal was keen on acquiringJabong. How the tables have turned!
One of the biggest roadblocks toSnapdeal’s salewas the reluctant early-backers Kalaari Capital and Nexus Venture. Both had their ownvalid reasons. But this made things difficult for Snapdeal’s largest investor Softbank that has been trying to script aprofitable exit plan.
Latest news reports reveal thatKalaari Capital has finally agreedto sell Snapdeal to Flipkart.
“After sustained discussions, they (Kalaari Capital) are now on board… There is an understanding that they will work with SoftBank down the line.”
With Kalaari on its side, Softbank now needs Nexus’ approval as well.
One investor down, one more to go
Softbank’s persuasion skills worked on one of the early-stage investors Kalaari. But Nexus is yet to concede. Peoplecloseto the development say that the other investor would also come on-board in the next few weeks.
Once both the investors are in sync with Softbank’s plan,SnapdealandFlipkartmerger would become a reality. This would be one of the biggest acquisitions that the Indian ecommerce industry has ever witnessed.
Co-founders Kunal Bahl and Rohit Bansal’s affirmation is also pending. Bahl and Bansal are not only negotiating for their stake but also for their employees. Buzz is that they both would receive $25 million each for their stake.
When the news about Snapdeal sale got out, the founderswroteto their employees,
“While our investors are driving the discussions around the way forward, I am reaching out to let you know that the well-being of the entire team is mine and Rohit’s top and only priority.We will do all that we can, and more, in working with our investors to ensure that there is no disruption in employment and that there are positive professional as well as financial outcomes for the team as the way forward becomes clear.”
FreeCharge is up for sale too?
One big question which is on everyone’s mind is – would FreeCharge merge with Flipkart as well? Is it part of the Snapdeal sale or a separate bid would have to be placed to buy the payments’ arm of the marketplace?
Turns out, FreeCharge has multiple suitors waiting in the line. Its sale would be a separate deal and is being valued at $40 million-$75 million.
Apart from Flipkart, Alibaba-backedPaytmtoo has made an offer to buy FreeCharge. In fact, Vijay Shekhar Sharma’s company is first in the line; the Bansals come second. Mobikwik, PayPal and PayU are other interested parties.
“There is an offer, but it could take a few months for any deal to close,”disclosedan insider.
Meanwhile, Snapdeal has started cost-cutting
While the investors arebusy drafting termsand conditions for Snapdeal M&A, the online marketplace is busy trimming down its expenses & operations. The Gurgaon-based company hasdecreased its office spaceby 60% and is shifting to one tower instead of two.
A source close to this developmentshared,
“As you may be aware we are consolidating our offices across Gurgaon. We will vacate Centre B on April 30, 2017. Essentially there will be one tower in all compared to two each in two compounds.”
The company has alsomoved outfrom its co-working space in Mumbai.
“The company does not want to operate out of the co-working space in Andheri anymore and has already moved it. Its sales team was working out of Awfis, a co-working company in Mumbai,”revealeda person aware of the details.
IOS had earlierreportedhow Snapdeal’s cost-cutting strategies are affecting sellers as well.
Flipkart is no longer themost and only popularecommerce portal. Keeping it company at the top is Amazon India,as perRedSeer’s E-tailing Leadership Index (ELI).
Flipkartdominated all the previous ELIs. But this time around,Amazonmanaged to close the marginal gap by improving itsNPSscore. Both the ecommerce biggies have the total score of 95 and sit at the number 1 position amongstSnapdeal,eBay,PaytmandShopclues.
RedSeer survey summary
ELI judges ecommerce companies on three main parameters: buying experience on the portal, best value and trust. Over 9,000 online shoppers across 30 cities participated in the survey. Customers were asked to rate the etailers for their performance between January 2017 and March 2017 (Q1).
Flipkart’s Q1 2017 score went down by 2 points when compared to its score inQ4 of 2016. The company lost those points in the ‘most trusted brand’ category. On the other hand, Amazon India gained two points in the same category compared to Q4 2016. So the US-based ecommerce leader gained Indian shoppers’ trust, whereas Flipkart lost it a little.
Snapdeal is at the same position as it was in 2016 Q4. Paytm slipped down due to poor delivery and post-delivery experience. Surprisingly, Shopclues and eBay managed to increase their score by working on their ‘buying experience’ feature.
Below is the January-March 2017ELIscore-card:
Amazon getting close to the top?
As far as overall sales in concerned, Flipkart still leads. But as we can see, Amazon is climbing up and is now on par with Flipkart when it comes to popularity, brand recall, trust and best value proposition. Amazon alsotook lead over Flipkartwith increase in sales in the first quarter of 2017.
Jeff Bezos’ India business gained prominence in the recent times due to Amazon Prime. Its rival Flipkart has been in the news formarkdowns,attritionandacquisitions. eBay India gotacquiredby Flipkart and Snapdeal isup for sale.
Needless to say, FY 2017-18 might be a decisive year as to who would be at the top, who would slide down and who would fade away.
The lost in oblivion ecommerce firmeBaywas back in spotlight soon after the news aboutmergerwithFlipkartwas announced. Peoplewonderedif it would get a new lease of life or fade away.
Ignoring the naysayers, eBay is positive aboutbecoming one of the top contendersfor the Indian ecommerce race.
Devin Wenig, eBay’s CEOsaid, “I’m very excited about this new exclusive partnership, which enables us to increase our penetration in India by making eBay’s global inventory accessible to a significantly larger set of Indian consumers. We’re committed to winning in India through this partnership.”
Flipkart-eBay merger to finalise by second-half of 2017
The deal has been signed but it would take at least a few more months for the online marketplaces to consolidate. eBay is hoping that by the second-half of 2017, the merger arrangement would be completed.
“We expect this deal to close early in the second half of 2017, and upon deal close we will no longer report active buyer GMV and related financials for eBay India. We do not expect the GMV or financial impact to be material to our overall 2017 results. However, we do expect to remove approximately 4 million buyers from our active buyer reporting,”saidScott Schenkel, eBay’s CFO.
Prepping for its revived India innings
The US-based ecommerce giant had to exit from Japan in 2002 and China in 2006. After losing its first-mover advantage in India, the etailer doesn’t want to lose yet another Asian ecommerce market.
Hence, eBay has joined force with the Indian ecommerce leader Flipkart. This way the American marketplace would still have a presence in India.Ebay believes that its $500 million investment along with the sale of India business would strengthen their competitive position in India’s booming ecommerce market.
While eBay’s active buyers would get access to India made products, sellers would get the opportunity to sell nationally and internationally.
Changes are more prominent than ever in online retail these days.Flipkartnowowns eBay and islooking to grab Snapdeal.Amazonishiking its seller fees, online grocersBigBasket and Grofers may merge,Myntra went offlineand now online furniture etailerUrban Ladderis looking to become asingle brand retailer. It has already applied to the Department of Industrial Policy and Promotions (DIPP) to make this change possible.
That’s not all; the ecommerce company is expecting approval from the Foreign Investment Promotion Board (FIPB) this quarter. And, it would like to extend its presence offline too.
Concentrating on a single brand
As a single brand online retailer, Urban Ladder will transform its current business with online sellers into a business with contract manufacturers. The etailer has over 40 online sellers on board.
The COO and co-founder of the company, Rajiv Srivatsasaid,“We are hoping to get the FIPB approval this quarter. Post the approval, sellers will become manufacturers i.e. contract manufacturers.”
According to Srivatsa, these contract manufacturers will receive orders through Urban Ladder. They will then produce what has been ordered, label the product and supply it to Urban Ladder.
Heshared,“Overall it is not about saving costs, but more about centralised buying and quality practices and processes. That will indirectly save costs for us. The entire idea of getting into single brand is that we will get to work with a smaller base of vendors and ultimately better returns.”
From its investors, SAIF Partners, Steadview Capital, Kallari Capital and Sequoia Capital has raised a total of $92 million.In January, it coaxed these investors for funding of Rs.200 crore. It received half the amountthe following month.
Urban Ladder plans togo offline by the end of the year. It aims to launch 10 offline retail stores in 3-4 cities in the country. Its first store is likely to open in Bangalore this June. To make these plans a reality, the online furniture etailer needs funds. It is looking to gather $20-30 million in the coming funding round which is expected by the end of the fiscal year.
Aiming for profits
Through these new changes, the etailer plans to make its business a profitable one. However, the home décor industry has seeing low sales due to the slowdown in real estate business. In 2015, the revenue earned from new home buyers interested in home interiors and modular kitchens was only 10%. Now it has reached 25%. Urban Ladder is also making major losses. It hasrecorded losses of Rs.181 croresfor the financial year in 2016. The cause behind this was lavish spending on advertising and employees. However, the ecommerce company has new targets in mind. These should hopefully reduce its spending and start filling the etailer’s pockets.
In January,two sources allegedthatBigBasketandGrofersare likely to merge businesses. According to the sources aware of discussions between the two online grocery rivals, talks of a merger were in the nascent stage. Based onrecent reports, three sources have confirmed the initiation of merger talks between both firms.
Why would BigBasket and Grofers join hands?
Besides becoming a fierce force in the online grocery industry, the joint entity BigBasket and Grofers form will receive major funds of $60-100 million. The three sourcedmentionedabove stated that Grofers’ investor the SoftBank Group will participate in that funding round it a merger happens.
BigBasket needs funds
Both retailers suffer from losses.
Etailer losses and burn rate
Losses – Rs.277 crore
Revenue – Rs.563 crore
Burn rate – $6 million per month
Losses – Rs.225 crore
Revenue – Rs.14.3 crore
Burn rate – $2 million per month
However, BigBasket is in need of funding.IOS reportedthat the online grocer is looking for $150 million to expand its business in the country. The etailer is one of the best funded in online grocery. It has communicated with investors like Amazon.com Inc., Tencent Holdings Ltd, Wal-Mart Stores Inc. and Fosun International Ltd, for new funds. But, the three sources mentioned earlier said these talks to raise funds have not progressed much.
Grofers has funds and active investors
With a real high burn rate, BigBasket is looking to onboard Grofers’ investor SoftBank before its cash supply runs out. Grofers currently has a stack of cash worth $50-60 million in its bank. This is quite sufficient for the etailer given its low burn rate andintentions to decrease spends.
In fact, the company founder and CEO, Alibinder Dhindsasaid,“The team at Grofers is focused on executing on our long-term strategy and we are well capitalized for that with an investor set that supports the vision. We don’t need to make any strategic moves at this time.”
BigBasket has private brands
Private brands are a new trend in the online selling space. And the big names in ecommerce arebanking on them to touch profits. BigBasket owns brands like Royal, Fresho, HappyChef and Tasties. In December, last year, Hari Menon, the chief executiveand co-founder of BigBasket claimed that 45% of his company’s revenue came from these private labels in March. The online grocery firm aims to earn Rs.1,800-2,000 crore in 2016 -17 and private brands could help with this target.
Grofers has also got private labels like Freshbury and Best Value, through which it sells staples and snacks.
Grofers is trying to move away from its hyperlocal model towards an inventory-led model. The etailer is trying to cut losses this way.
One of the three sources with knowledge of the merger talkssaid,“Their business models overlap. BigBasket has always been an inventory led, private-label play while Grofers is trying to replicate it. The only upside for BigBasket in this deal is getting SoftBank as an investor.”
Online grocery players have suffered gravely in the past. However, with new hope and better planning,new entrantsare expected. BigBasket and Grofers have stood strong since inception. So, maybe by merging they could end up strong againstnew competitiontoo.
But, neither of the two companies have confirmed talks of a merger. One of the three sourcesrevealed,“The talks are in early stages, but there is definitely interest from both parties. If the deal happens, SoftBank will invest in the merged entity but a lot hinges on the valuation. The stakeholders are yet to agree on a valuation.”